Baker's Choice: June 2007

It's summertime, and as the fog rolls in (and our friends and clients wisely take off for vacation), we thought we'd pause to follow up on some of the issues we've been tracking for you this year. But first, we've got a concise (if opinionated) summary of the U.S. Supreme Court's recent subversion of Title VII's pay discrimination protections. Plus, a special bonus: our practice piece on the benefits of using your lawyer before employment issues get out of hand.

• The US Supreme makes it harder to file a pay discrimination claim under Title VII. The May 29, 2007 decision of the U.S. Supreme Court in Ledbetter v. Goodyear Tire and Rubber Co. Inc. (No. 05-1074) generated not only a substantial splash in the media, but the public reading of a dissent from the bench by Justice Ruth Bader Ginsburg. The sharply divided court held that the statute of limitations for pay discrimination under Title VII runs (and expires soon after) the first pay violation occurs, even when it would be impossible for the employee to know about the violation until much later. In her dissent, Justice Ginsburg characterized the majority's interpretation of Title VII as "cramped" and "parsimonious." Rick Levine's short piece on Ledbetter explains why the holding is potentially extremely significant, though more significant in some states than others, and likely less significant in California than in many other states.


• Follow-Up, Part I: Employment Law: We (along with every other California employment lawyer!) continue to monitor Edwards v. Arthur Andersen LLP, the 2006 case wherein a California appellate court rejected the Ninth Circuit's creation of a "narrow restraint" exception to California's public (and statutory) policy against post-employment noncompete agreements. Currently, Edwards is still pending before the California Supreme Court, with amicus briefs piling up on both sides of this important question. As of June 12 the case has been fully briefed, but with argument still to come, we don't expect to see an opinion until (at the earliest) the end of the 2007. Whatever its resolution, the Edwards decision will have profound implications for California employees and employers. The California Supreme Court did issue an important employment law opinion late in the term, Murphy v. Kenneth Cole Productions, Inc. In Murphy, the court held that under California law, employees have a 3-year (rather than a 1-year) statute of limitations for filing wage claims for missed meal and rest breaks. Compare this to the U.S. Supreme Court's decision in Ledbetter for a hint of the difference between California's vital public policy on protecting individual rights and the emerging "policy" of our U.S. Supreme Court (or, perhaps more accurately, of some of its justices).


• Follow-Up, Part II: Option Backdating: United States v. Gregory Reyes, the first major criminal trial against an executive based on option backdating, began here in San Francisco on June 18. Reyes, the former CEO of Brocade, was charged in July with securities fraud and conspiracy for misleading investors by backdating stock option grants, altering company documents and causing the company to report false financial results. Commentators expect this case to be a harbinger of what's to come: if the government wins, Reyes could well provide a roadmap for future prosecutions against executives linked to the many investigations into option backdating practices that are remain open. In other backdating news, the Delaware Chancery Court recently denied motions to dismiss in two shareholder derivative actions based on stock option grant practices: Ryan v. Gifford (backdating) and In re: Tyson Foods (spring-loading). These two pre-discovery opinions clearly signal that the influential Delaware court is willing to entertain the notion that both backdating and spring-loading constitute deceptive practices by directors vis-a-vis shareholders. Again, these are cases we will be watching closely and reporting back to you on.


• Follow-Up, Part III: The final Section 409A Regulations . They're here, they're final, they're no worse (and in some cases, better) than the proposed regs were. Executives with severance packages (especially those at public companies) need to be aware that deferred compensation issues may be lurking in places you least expect them. Best advice: don't sign any separation agreement without checking first for Section 409A implications.


• When should an employee retain counsel? As those of you who work with us know, we represent both employers and employees. One of the questions we get asked most frequently (from both sides of the table) is: when does it make sense for an individual employee to have their own counsel? Only at the time something "happens" (i.e., start a new job, terminate from an old job, have problems on the job)? Only as part of an M&A deal? Of course, the answer is: it depends. But retaining counsel for these purposes can make all the difference in how employment questions are resolved. We've put together a practice piece on this topic for you that lays out a few scenarios we (and our clients) confront regularly.


• On the L&B calendar: I'm looking forward to reprising my role next October as senior skeptic (and the only plaintiff's lawyer!) on the NASPP Annual Conference panel, Keeping Up With The Joneses - The Hottest Compensation Issues Today. Apparently last year's panel in Vegas was a hit, so they asked us back for more, this year in San Francisco. Our panel will also be featured as part of the Corporate Counsel's Hot Topics and Practical Guidance Conference. For more info or to register for the conference, go to the NASPP conference site. And with both conferences taking place here at home, I hope I'll see some of your smiling faces at my session.

Best wishes for a great summer from everyone here at Levine & Baker LLP!